Short-rotation Management Options for Slash and Loblolly Pine in Southeast Georgia, USA

Transcription

1 Short-rotation Management Options for Slash and Loblolly Pine in Southeast Georgia, USA by E. David Dickens, Coleman W. Dangerfield Jr., and David J. Moorhead 1 Abstract Non-industrial private forest (NIPF) landowners have perceived reduced product market availability and increased price uncertainty over the past three years in the Southeastern United States. Southeast Georgia NIPF landowners seek management options utilizing two commonly available pine species, loblolly (Pinus taeda L.) and slash (Pinus elliottii Engelm.), to enhance feasibility, profitability, and cash-flow of production forestry enterprises. At the same time, NIPF landowners desire heightened flexibility across time required to achieve marketable forest and related cropping system products. This study examines feasibility, profitability, and cash-flow of short-rotation management options affecting wood-flow for slash and loblolly pine including thinning, fertilization, and pine straw harvests under base levels of stocking, productivity and product prices. Financial measures of profitability calculated include soil expectation value, (SEV), annual equivalent value (AEV), and internal rate of return (IRR). Introduction Private non-industrial forest landowners in Southeast Georgia question whether to plant loblolly or slash pine on cut-over and old-field sites. They also question spending moderate to relatively large sums of money in intensive forest management under the current and anticipated stumpage prices and economic uncertainty. Forestry in Georgia is the leading industry generating $20 billion in In addition to the economic reasons for the importance of pine production in southeast Georgia, there are political reasons why this is important. Some reasons are: This area has the highest NIPF landowner concentration in the world. It has been called the Nations wood basket. It perhaps contains the largest concentration of pulp mills any where in the world. It is the home of the largest wood using industry and world s largest forest landowner - International Paper. It is the home of the Herty Foundation and the Warnell Family. We are compelled to promote education of forestry production across the complete spectrum of potential clients in the State. Common assumptions Rotation age is 24 years. Discount rate of 8%. Results reported in constant dollars, before taxes. Compute soil expectation value (SEV), annual equivalent value (AEV), and internal rate of return (IRR) for each scenario. Fire $2/ac./yr.; $2/ac./yr.; Property taxes at $5/ac./yr. Then, the total annual cost for each year of the rotation = $9/acre. This goes in the transaction table as an annual cost during the rotation. The present value of this net, annual cost flow is $ Site preparation and planting costs totaled $250/acre (Table 1). This cost could include a mechanical site prep treatment, burn, and plant or a herbicide, burn, plant, and herbaceous weed control. Fertilization costs $100/acre (Table 2). South Georgia stumpage prices, reported through Timber Mart-South (TMS) for 4 th Quarter year 2000 average, used in this analysis for loblolly and slash are net of property taxes at harvest (2.5%) and net of marketing costs (8%). The low TMS prices for pulpwood and chip&saw are used for thinning and average TMS prices for pulpwood, chip&saw and sawtimber are used for the clearcut. Net converted prices are found in Table 3. Site preparation options and associated costs vary extensively by location, prior stand history, harvesting utilization, landowner objectives, and monies available. The assumption used is that level of site preparation intensity is matched to level of competition control or soil amelioration needed so that wood-flows are comparable within the site productivity level used, after site preparation and planting. The site preparation, planting and seedling cost used in this analysis is as follows (Dubois et al. 1998, Table 1): 1 E. David Dickens, Assistant Professor Warnell School of Forest Resources, University of Georgia, Coop. Extension Service, PO Box 8112 GSU, Statesboro, GA USA, , Fax: , ddickens@uga.edu ; Coleman W. Dangerfield, Jr., Warnell School of Forest Resources, Forestry 4-401, University of Georgia, Athens, Georgia USA, , FAX: , dangerfi@smokey.forestry.uga.edu ; David J. Moorhead, Professor Warnell School of Forest Resources, University of Georgia, P.O. Box RDC Road, Tifton, Georgia 31793, , Fax: , moorhead@uga.edu. 61

2 Fertilizer: A cost of $100 for slash and loblolly per age 6 (slash) or 8 (loblolly) and 15-years-old was assumed (Table 2). Fertilization with 125 N + 40 P/acre (1 st application) or 200 N + 40 P/acre (2 nd application as DAP+urea with 100 lbs muriate of potash/acre as needed) per acre was part of this scenario to maintain pine straw production rates (Dickens 1999, Moorhead 1999), to enhance wood volume (NCSUFNC 1999), and change product class distribution (Dickens 2001). Fertilization age 6 or 8-years-old is 2 years prior to the initiation of straw raking (just prior to/at canopy closure). Pine straw production rates have been found to increase 18 to 24 months after initial fertilization (Dickens 1999). The second application 7-9 years later is just after a thinning (thinning scenario)and after the wood volume response to the 1 st application has become negligible. The periodic fertilizer application costs are converted to present values (PV) in year one, then re-computed as annual equivalent values (AEV). Present values and annual equivalent values for slash and loblolly differ due the delay in initiation in pine straw raking in loblolly (10 years) versus slash (8 years). These AEVs were then put in the transaction table as annual expense cash-flows. Table 1. Site preparation and planting per acre cost level expressed as present value used in the profitability analysis of slash and loblolly scenarios for Southeast Georgia, USA, Site preparation intensity Cost per Treatments included acre Medium $250 Mechanical, burn, plant or Chem, burn, plant, herb weed control Table 2. Fertilizer periodic, per acre cost levels expressed as present values and annual equivalent values as used in the profitability analysis of slash and loblolly scenarios, Southeast Georgia, USA, Species Periodic cash cost per acre, per year applied Present value of periodic cash cost Loblolly $100 $81.05 $7.70 Slash $100 $94.54 $8.98 Annual equivalent value of periodic cash cost Table 3. Cash and net (net of property taxes and marketing costs) per cord stumpage prices used in the profitability analysis of slash and loblolly scenarios, Southeast Georgia, USA, Price level Pulpwood Chip-N- Saw Sawtimber Cash $18.36 $83.96 $88.65 Low Net $16.43 $75.14 $79.34 Cash $24.15 $92.85 $ Average Net $21.61 $83.10 $96.22 Pine straw: A range of and $100 per acre, per year raking income for slash scenarios, and $25 and for loblolly have been noted in Southeast (slash) and Central (loblolly) Georgia between 1998 and Pine straw raking starts in year 8 for slash or year 10 for loblolly. The two year delay in loblolly stands is due to reduced access and less contractor demand. Periodic pine straw income is converted to present values (PV) in year one, then recomputed as annual equivalent values (AEV) at the discount rate of 8%. These AEVs were then put in the transaction table as annual income cash-flows (Table 4). Table 4. Pine straw periodic, per acre income levels expressed as present values and annual equivalent values as used in the profitability analysis of slash and loblolly scenarios, Southeast Georgia, USA, Species Periodic cash Present value of Annual equivalent income periodic value of per acre, cash periodic per year income cash raked income Loblolly with Thin $25 $81.41 $ $7.73 $15.46 Loblolly without $25 $95.47 $ $9.07 $18.13 Thin Slash with Thin $100 $ $ $20.04 $40.08 Slash without Thin $100 $ $ $22.71 $

3 Thinning: scenarios show no thinning or one thinning at year 15. Total woodflow of the scenario with thinning is 95% of total woodflow of the scenario without thinning for slash and loblolly without fertilization and approximately 100% with fertilization. The residual basal area, after thinning (5 th row with select from below) is set at 65 ft 2 /ac. Product class specifications (inside bark) for pulpwood, chip&saw, and sawtimber are found in Table 5. No adjustment was made for stem quality (branching, straightness, or stem fusiform rust incidence). Table 5. Product class specifications. Inside bark measurements. Product Class DBH range (inches) Small-end Diameter (inches) Minimum length (feet) Pulpwood Chip-N-Saw Sawtimber > Species specific assumptions Rotation age is 24-years throughout 1. Slash 500 age 5-years-old. Production rate 2.0 age 24- years-old without fertilization. Base slash scenario woodflow is 15% < base loblolly woodflow (Shiver et al. 1999) at age 24 years-old. Assumed fertilizer applications will increase d.b.h. by 3/4" in 9 years and ht. by 2' for slash, and approximate a volume increase of 0.4 cords per acre per year for 9 years. a. No thin, no straw, no fertilization b. Thin (@ age 15 to 65 RBA/ac), no straw, no fertilization c. No thin, age 6 and 15- years-old, no straw d,e. No thin, fertilize,(as c.), and rake pine or $100/ac/yr in years 8-23 f. Thin, fertilize, no straw g,h. Thin, fertilize, and rake straw years 8-14 & or $100/ac/yr. No pine straw income after thin at age Use GaPPS PMRC General model for both slash and loblolly scenarios. Length increment (feet) and 24. Clean-up cost after $12/ac (burn) 2. Loblolly pine 500 age 5-years-old. Production rate = 2.3 cds/ac/yr without fertilization by age 24. Base loblolly scenario woodflow is 15% >slash base woodflow (Shiver et al. 1999) at age 24 years. Assumed fertilizer applications will increase d.b.h. by 1.0" in 7-9 years and ht. by 2.5' for loblolly, and approximate a volume increase of 0.5 cords per acre per year for 7-9 years. a. No thin, no straw, no fertilization b. Thin (@ age 15 to 65 RBA/ac), no straw, no fertilization c. No thin, age 8 and 15-years-old, no straw d,e. No thin, fertilize,(as c.), and rake pine $25 and /ac/yr in years f. Thin, fertilize, no straw g,h.thin, fertilize, and rake straw years & $25 or /ac/yr. No pine straw income after thin at age and 24. Clean-up cost after $12/ac (burn) Results and Discussion The 2.09 and 2.35 cords/ac/yr base productivity levels at age 24-years-old for slash and loblolly respectively is realistic on most cut-over sites with chemical site preparation and post-plant herbaceous weed control (Pienaar and Rheney 1996) and is conservative on most old-field sites (Pienaar and Rheney 1996). The 0.4 (slash) and 0.5 (loblolly) cds/ac/yr increase in wood production is conservative compared to other published reports (Jokela and Stearns-Smith 1993, Martin et al. 1999, NCSFNC 1999) with nitrogen plus phosphorus fertilization at ages 6 (slash) or 8 (loblolly) and 15-years. No increase in pine straw income per acre was assumed with fertilization. Fertilization studies (Blevins et al. 1996, Dickens 1999) illustrate that pine straw production can be increased by an average of 40-50% over unfertilized stands. Fertilization was included in the pine straw production scenarios to maintain straw production as nutrients are removed/displaced with each raking. 63

4 Under the assumptions of $250/acre for site prep, seedlings, and planting (Dubois 1998), a base site productivity level of 2.09 cds/ac/yr for slash and 2.35 cds/ac/yr for loblolly, turn-key fertilization cost of $100/acre at ages 6 or 8 and 15 years to maintain pine straw production and enhance wood volume growth and value, the net stumpage prices and annual costs used, and a 24-year rotation age, all scenarios for both species achieved a rate of return of 8% or better. Generally, the levels of forest management are economically justifiable in these cases, even using low to medium 2000 stumpage prices (TMS 2000) for South Georgia. Thinning loblolly and slash pine stands increased internal rate of return by 1½% (slash) to 2% (loblolly) over unthinned stands (without pine straw income, Tables 6-7). Thinning also increased total cash flow by $450 (slash) to $730/acre (loblolly) compared to the unthinned counterpart with no additional cost. The addition of pine straw income for slash pine increased rate of returns from % to 12.24% and 18.13% in unthinned stands (Table 6). In thinned slash pine stands, pine straw income increased rate of returns from 9.72% to 13.84% and 19.62% (Table 6). Pine straw income in the loblolly scenarios increased rate of returns from % in the unthinned scenario to 10.10% and 11.36% (Table 7). In the thinned loblolly scenarios, pine straw income increased rate of returns from 10.79% to 12.89%. Fertilization with 125 or 200 N+40 P/acre at ages 6 or 8 and 15-years-old in the unthinned slash and loblolly scenarios increased cash flows by approximately $700/acre over the unfertilized scenario but at a cost of $200/acre. The highest SEV, AEV, IRR, and cash flow came from the slash pine scenario with a thinning, fertilization, and pine $100/acre. The unthinned, fertilized slash pine scenario with the $100/acre pine straw income had the second highest SEV, AEV, and IRR. When wood value only is considered, loblolly produced more wood, more wood value (a diameter driven function),a higher SEV, AEV, IRR and cash flow with the aforementioned assumptions. Non-industrial private forest landowners do have some attractive forest management options with both slash and loblolly pine even when using low to medium stumpage prices. Until pine straw contractor preferences and pricing change, where both slash and loblolly pine are grown, slash pine is preferred where pine straw can be raked and upper end annual revenues can be realized. Table 6. A comparison of slash pine plantation management scenarios 1 under a 24-year rotation and their effect on economic variables for Southeast Georgia. Fert. yr. 15 Pine Straw % PW MAI 2 SEV 3 AEV 4 IRR 5 % Cost 6 Return 6 N N N N Y N Y N N Y N Y N Y Y N Y Y Y Y Uninflated, 8% discount rate, before taxes, GaPPS v 4.20, General PMRC model with treatment. 2 MAI = Mean Annual Increment of wood growth, cord equivalents per acre per year 3 SEV = Soil Expectation Value, calculated from perpetual rotations 4 AEV = Annual Equivalent Value, net present worth expressed as an annual annuity 5 IRR = Internal Rate of Return of the investment scenario 64

5 6 Costs and Returns are total re un-discounted values Table 7. A comparison of loblolly pine plantation management scenarios 1 under a 24-year rotation and their effect on economic variables for Southeast Georgia. Fert. yr. 15 Pine Straw % PW MAI 2 SEV 3 AEV 4 IRR 5 Cost 6 Return 6 N N N N Y N Y N N Y N Y N Y Y N Y Y Y Y Uninflated, 8% discount rate, before taxes, GaPPS v 4.20, General PMRC model with treatment. 2 MAI = Mean Annual Increment of wood growth, cord equivalents per acre per year 3 SEV = Soil Expectation Value, calculated from perpetual rotations 4 AEV = Annual Equivalent Value, net present worth expressed as an annual annuity 5 IRR = Internal Rate of Return of the investment scenario 6 Costs and Returns are total re un-discounted values Literature Cited Bailey, R.L. and B. Zhou GaPPS Model. Warnell School of Forest Resources- UGA, Athens, GA. Blevins, D., H.L. Allen, S. Colbert, W. Gardner Nutrition management for longleaf pinestraw - Woodland Owner Notes. NC Coop. Ext Serv. Paper. 8 p. Dickens, E.D The effect of inorganic and organic fertilization on longleaf tree growth and pine straw production. In: Proceedings of the 10 th Biennial So. Silvi. Res. Conf., Shreveport, LA, Feb 16-18, pp Dickens, E.D The effect of one-time biosolids application in an old-field loblolly pine plantation on diameter distributions, volume per acre, and value per acre. In: Proceedings of the 11 th Biennial So. Silvi. Res. Conf., Knoxville, TN. March 19-22, 2001 (in press). 8 p. Dubois, M.R., K. McNabb, and T.J. Straka Costs and cost trends for forestry practices in the South. Forest Landowner Magazine. March/April pp Jokela, E.J. and S.C. Stearns-Smith Fertilization of established southern pine stands: Effects of single and split nitrogen treatments. SJAF 17(3): Martin, S.W., R.L. Bailey, and E.J. Jokela Growth and yield predictions for lower coastal plain slash pine plantations fertilized at mid-rotation. SJAF 23(1): Moorhead, D.J Fertilizing pine plantations - a county agent s guide for making fertilization recommendations. GA Coop. Ext. Serv. Warnell School of For. Res., The Univ. of GA, Athens, GA, Morris, L.A., E.J. Jokela, and J.B. O Connor, Jr Silvicultural guidelines for pinestraw management in the SE US. GA Forest Res. Paper #88. GFC, Macon, GA. 11 p. NCSFNC North Carolina State University Forest Nutrition Coop - 28 th Annual report. 23 p. School of Forest Resources, NCSU, Raleigh, NC. Pienaar L.V. and J. W. Rheney, Jr Potential productivity of intensively managed pine plantations - Final Report. The GA Consortium for Tech. Competitiveness in Pulp and Paper. 41 p. Shiver, B.D., J.W. Rheney, and K.L. Hitch Loblolly pine outperforms slash pine in SE GA and Northern Florida. SJAF 24(1) pp TMS Timber Mart So stumpage prices - 2 nd qrtr for So GA Warnell School of Forest Res. - UGA, Athens, GA. 65